Online poker 'a gamble too far'

ONLINE poker sites have expanded dramatically in recent years, but analysts are warning that they may prove a gamble too far and become the next dotcom bubble.

The number of people playing poker both online and face to face is soaring due to televised celebrity tournaments and poker games on soaps such as Coronation Street and The Archers, but experts say the rise in numbers is unsustainable.

'The bubble is going to burst at some point,' said Mark Griffiths, professor of gambling studies at Nottingham Trent University.

More than 1.5m people play poker online in Britain, betting millions of pounds and fuelling incredible valuations for poker companies.

The world's largest site, PartyPoker.com, is considering floating on the stock market for £3bn, making it bigger than British Airways, and rival site 888.com is weighing up a float.

British company SportingBet is now worth £1bn compared with just £164m last year, and existing betting giants such as Ladbrokes and William Hill are seeing profits boom thanks to online poker.

Because American companies are effectively banned from offering poker online - US law covering online gaming is in dispute - British firms have a head start against major US casino operators such as MGM Mirage, Caesars Palace and Harrah's.

But billion-pound valuations may be swept aside by a wave of consolidation. 'It is the Amazon or eBay effect,' said one commentator. 'There will be one site so big that everyone else will be sucked under.'

Tamar Yaniv of PokerStars.com, the world's second-largest site: 'There are definitelytoo many players in the market at the moment. The next two years will be survival of the fittest.'

Greg Feehely of broker Altium Capital predicts that the market will grow by 60 per cent this year. He said 'It could double in size but we are erring on the side of caution as the rates of growth are totally unsustainable in the medium term. There will be consolidation at some point.'

Unlike traditional bookmakers who can suffer at the hands of lucky punters, there is little risk in setting up these companies because they take their cut from the bets.

Feehely said: 'Poker sites are attracting players by advertising million-pound pots at no risk to themselves.'

The risk, he says, is that the rate of growth could slow dramatically. 'Poker is the hot thing at the moment, but who knows in the future? Any slowdown will not be like the dotcom bubble. Dotcoms never made any money. These companies are generating cash and profits by the bucketload.'

However, Michael Mainelli of the Centre for the Study of Financial Innovation warns that the boom might not be all it seems.

'It is very difficult to get reliable figures and it has the air of a fad,' he says. 'Player numbers are likely to level off in a couple of years because it takes up a lot of time compared with laying bets on a betting exchange. And,' he warns, 'there is a fair amount of automation in the industry.'

Which means when you believe you are playing against a real person, it is actually a computer. Says Mainelli: 'You are never going to win against the house.'